Manufacturing is often pegged as the antithesis of the services industry. As a result, most manufacturers ignore the potential of the aftermarket services. This is often compounded by the inherent attitudes and shortcomings of the industry itself, such as product-centricity, reactive service culture, gaps in service capabilities, a "let it break" customer mindset. However, since the global downturn of 2008–2009, manufacturers worldwide are looking beyond traditional product portfolios to improve their top and bottom lines. In fact, industry analysts predict that service optimization will be core to future profitable revenue growth. But to enable new service strategies, leading manufacturers must make necessary investments.1
Guiding Principles for Implementation of Aftermarket Services Strategies
The challenges faced by manufacturers in developing prudent aftermarket services—and the strategies required to counter them—are complex and demand difficult cultural and operational changes. To overcome them, manufacturers must focus on developing an internal culture that fosters customer-centric services, complemented by a technology infrastructure that pays dividends over the long term. Drawing from our experience with large global manufacturers, we recommend the following guiding principles to serve as the foundation for any aftermarket services strategy. (See Figure 1.)
Vision: Organizational Goals and Customer Focus
No one-size-fits-all prescription is available for the extent to which an organization adopts service strategies. Typically, manufacturers need to transition from a reactive to a proactive approach to build customer services. This facilitates long-term relationships, enabling manufacturers to adjust to changing customer needs.
The provider leverages stronger capabilities and initiates contact without being asked.
Contact is focused on holistic service and not solely on specific problems.
There are opportunities to provide performance insights, early warnings, advisory services.
Long-term engagement and ongoing opportunities are supported.
Demands and results in stronger service execution capabilities to deliver to terms of service agreements.
Capability: Continuous Self-Assessment of Service Capabilities and Mitigation
Continuously assessing capabilities, understanding customer needs, conducting a gap analysis and deploying mitigation strategies, such as investments in new technologies, is critical to progressing on the service maturity path. A strong service development lifecycle (such as the one in Figure 2) can help.
This requires manufacturer to:
Leverage new technology to mitigate capability gaps. Holistic use of the SMAC Stack™—or social, mobile, analytics and cloud technologies—can help manufacturers sift through vast troves of mobile and social data stored virtually and enhance their service capabilities, as well as identify value propositions for their customers, address specific customer needs and enhance customer experience. For more insights on this topic, see parts one and two of our white paper series on mobility in field services management.
Adopt the SaaS model to deliver services. Manufacturers can also leverage technology by adopting the Software-as-a-Service (SaaS) model to custom-build and/or deploy out-of-the-box software platforms that are capable of delivering services that did not previously exist in their service portfolios. For example, a leading building automation system and equipment manufacturing client recently ventured into energy management services by leveraging a combination of smart meters and customer energy consumption data. The manufacturer's customers were using third-party services to obtain these metrics.
Execution: Establish Success Criteria, Measure Success and Incorporate Feedback
When implementing aftermarket services strategies, manufacturers should establish well-defined success criteria, measure success systematically and create mechanisms to incorporate the lessons learned. The resulting corrective actions help set realistic goals and show progress on the maturity path during each successive period.
Assessing Real-world Results
When manufacturers move from operating as a reactive service provider—where services played a supporting role to product sales—to a proactive service provider that uses new SMAC-enabled capabilities to convey its strong services value proposition to customers, their benefits are multi-fold, as illustrated in Figure 3. They strengthen their brand by enhancing aftermarket customer experience with effective services and generating revenues independent of its product offerings. These capabilities are difficult for a competitor to replicate in a short period of time, thus delivering a sustainable competitive advantage.
Although manufacturers face formidable obstacles when attempting to implement aftermarket service strategies, they must challenge the status quo with an eye on the future. This involves disruptive change, starting with the service culture and operating model, through building a new technology infrastructure around the SMAC Stack. In addition, they must establish competence and, eventually, outperformance in the aftermarket.
Achieving both objectives will help manufacturers serve the end-to-end needs of their customers, thereby facilitating a sustainable competitive advantage for the foreseeable future.
For real-life examples and quantifiable outcomes, sample scorecards and metrics and deeper insight into implementing an aftermarket services strategy, please read our whitepaper Enabling Aftermarket Services as a Growth Driver for Manufacturers [PDF]. Visit Cognizant's manufacturing and logistics practice for more details.